U.S. Tax Reform, Doing Business in the U.S. and Foreign Persons

FC is foreign corporation organized in the Republic of Ireland and recently listed on the Euronext Dublin Stock Exchange. FC will organize a Delaware C corporation that will manufacture and distribute product in the U.S. market. FC’s Vice President of Tax recently contacted you to discuss doing business in the United States. He/she raised several questions as follows:

a) As it will take at least 1 year to build out a U.S. manufacturing facility FC is considering having Irish based employees travel to the U.S. to meet with current third-party distributors for business development meetings – the VP of Tax asked whether this creates potential U.S. tax issues for FC? Please describe;

b) FC would like to fund the new U.S. operations with a combination of debt and equity – the VP of Tax read something about U.S. interest disallowance rules and asked whether such rules would apply to its new U.S. operations. Please elaborate;

c) FC will charge its U.S. operations for management services. The U.S. operations will also purchase raw materials from FC that will be used in the manufacturing process. The VP of Tax asked whether the BEAT could apply to its U.S. operations. Please explain whether the BEAT could apply to FC’s U.S. operations; and

d) On potential interest, royalty and dividend payments from the U.S. operations to FC, the VP of Tax asked you to describe how the U.S. withholding tax rules should apply. Please explain the application of the U.S. withholding tax rules as well as the potential application of the U.S.-Ireland Income Tax Treaty.

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